Inventory accuracy, delivery speed, and flexible fulfillment now shapes how customers is judging a brand. As the order volumes are growing, managing warehouses, transportation, returns, and carrier relationships inside the company can creates costly delays and makes the operations more difficultly. That is where 3pl logistics services can providing strategic supports without requiring a company to building their own logistics infrastructure by themselves.
What does a third-party logistics provider do?
Businesses often asks that what is 3pl logistics and how it can improving their daily operations in a better ways? A third-party logistics provider are the company who manages selected supply chain activities for another businesses. These activity may includes:
- Receiving and storing the inventory stocks in warehouses
- Picking, packing, and shipping the customer orderings
- Freight managements and coordinating with different carriers
- Inventory trackings and preparing the reportings
- Returns processing and managing the returned products
- Kitting, labeling, and providing the other value added services which is required by businesses
Instead of investing heavily in warehouses, software, staffs, and transportation contract, a company can using an established provider who have the required systems and expertises for managing these activities more efficiently.
This also helps businesses for avoiding the requirements of managing every logistics activities internally, which can be more complicated and expensive when the business are growing faster.
Why companies outsource fulfillment
The main advantages of 3pl logistics are that it makes businesses more scalable and helps them for managing their operations in a better way. A business can increasing or reducing their storage and fulfillment capacity whenever the demands are changing according to the customer requirements. This is particularly valuable for seasonal brands, fast growing e-commerce business, and companies who is expanding their business into new regions and markets.
Other benefits is including:
- Lower operating costs
Shared facilities, negotiated carrier rates, and optimized labor can reduces the overall logistics expenses and makes the operations more cheaper for companies. Businesses also can avoiding the requirement of investing large amount of money in their own warehouse facilities and transportation systems.
- Faster order fulfillment
The strategically located warehouses can helps businesses to shortening the delivery distances and improving the shipping times more faster. This can also helps customers for receiving their orders quickly without waiting for a longer time period.
- Better inventory visibility
Integrated warehouse management systems helps businesses for monitoring the stock levels and identifying the replenishment requirements when the products are running out from the stock. It also helps for reducing the chances of inventory mistakes and managing the available products in a more better way.
- Improved customer experience
Accurate deliveries, reliable tracking, and efficient returns can increases the customer satisfaction and encourages customers for purchasing the products again in the future. When orders are delivering correctly and on time, customers can develops more trust with the company and its services.
- More focus on core activities
Outsourcing the routine logistics activities allows internal teams to concentrating on product development, marketing, and sales activities. This helps the company for focusing more on growing their business instead of spending most of their time in managing the daily logistics problems and operational difficulties.
Choosing the right logistics partner
Not every logistics providers are offering the same capabilities, technologies, and services for businesses. Before signing an agreement, businesses should properly evaluates the provider’s warehouse locations, technologies, pricing models, service-level agreements, and experiences with their product categories. Selecting a wrong provider can creates additional problems instead of solving the existing operational issues.
Businesses should asking potential partners some important questions before making their final decisions:
- Can the systems integrates with your e-commerce platform or enterprise softwares without creating technical problems?
- How quickly the orders are processing after the purchases are completed by customers?
- What inventory accuracy rates the provider can be guaranteed for maintaining?
- How the damaged goods and returned products are being handled by the provider?
- Can the storage and fulfillment capacities are expanding during the peak seasons when order volumes are increasing?
- Are the storage, pick-and-pack, and shipping fees clearly explaining to the businesses before the agreement is finalized?
A reliable provider should also providing transparent reporting systems that helps businesses for understanding their operational performances. Performance dashboards covering order accuracies, on time shipping, inventory variances, return rates makes easy for identifying the problems before they becomes more serious for the business operations.
Companies should also maintaining regular communications with their logistics partners because the business requirements are not remaining same all the time. Changes in customer demands, product launches, and seasonal sales can requires adjustments in the fulfillment processes.
When should a business use 3PL support?
A company may benefits from 3pl logistics services when their internal warehouses is reaching near capacity, fulfillment errors are increasing more frequently, or shipping costs are becoming difficult for controlling by the internal teams. Outsourcing are also useful for companies who is entering new markets where local warehousing facilities and delivery knowledges are very essential for managing the business operations properly.
For smaller companies, what is 3pl logistics may initially seems like a question about costs only, and they may thinks that outsourcing is not suitable for their smaller business operations. But in actual practices, the decision are also depends on time, reliability, operational requirements, and growth potentials of the company. A suitable provider can offering infrastructures which would be difficult and more expensive for building independently by smaller businesses.
Businesses should also considering their future requirements before choosing a logistics partner because a provider who is suitable for current order volumes may not always be suitable when the business are growing in the future. Therefore, checking the scalability and flexibility of the services are important for avoiding the need of changing providers again and again.
With the right structures and proper planning, 3pl logistics services can turns the fulfillment operations into a competitive advantages instead of becoming daily operational obstacles for the company. However, businesses also needs to reviewing the performance regularly to ensures that the logistics arrangements are continuing to meeting their changing requirements and customer expectations.
